Painter Corporation Painter Corporation has the following information for the current month:

Units started 100,000 units

Beginning Work in Process: (35% complete) 20,000 units

Normal spoilage (discrete) 3,500 units

Abnormal spoilage 5,000 units

Ending Work in Process: (70% complete) 14,500 units

Transferred out 97,000 units

Beginning Work in Process Costs:

Material $15,000

Conversion 10,000

All materials are added at the start of the production process.Painter Corporation inspects goods at 75 percent completion as to conversion. Refer to Painter Corporation.Assume that the costs per EUP for material and conversion are $1.00 and $1.50,respectively.What is the amount of the period cost for July using FIFO?

Question

Painter Corporation Painter Corporation has the following information for the current month:

Units started	100,000 units
Beginning Work in Process: (35% complete)	20,000 units
Normal spoilage (discrete)	3,500 units
Abnormal spoilage	5,000 units
Ending Work in Process: (70% complete)	14,500 units
Transferred out	97,000 units
Beginning Work in Process Costs:
	Material $15,000
	Conversion 10,000

All materials are added at the start of the production process.Painter Corporation inspects goods at 75 percent completion as to conversion. Refer to Painter Corporation.Assume that the costs per EUP for material and conversion are $1.00 and $1.50,respectively.What is the amount of the period cost for July using FIFO?

Quizplus · Accepted Answer

First, let's calculate the equivalent units of production (EUP) for materials and conversion:

Materials:
Beginning WIP (20,000 units * 35%) = 7,000 EUP
Units started (100,000 units - 20,000 units) = 80,000 EUP
Total EUP = 87,000 EUP

Conversion:
Beginning WIP (20,000 units * 35%) = 7,000 EUP
Units started (100,000 units - 20,000 units) = 80,000 EUP
Ending WIP (14,500 units * 70%) = 10,150 EUP
Total EUP = 97,150 EUP

Next, let's calculate the cost per EUP for materials and conversion:

Materials:
Total material cost = $15,000
Total EUP = 87,000 EUP
Cost per EUP = $15,000 / 87,000 EUP = $0.1724 per EUP
(rounded to four decimal places)

Conversion:
Total conversion cost = $10,000 + ($1.50 * 97,150 EUP)
Total EUP = 97,150 EUP
Cost per EUP = $10,000 / 97,150 EUP + ($1.50 per EUP) = $0.1075 + $1.50 = $1.6075 per EUP
(rounded to four decimal places)

Using FIFO, we need to account for the normal spoilage (3,500 units) and the abnormal spoilage (5,000 units):

Materials:
Normal spoilage = $0.1724 per EUP * 3,500 units = $603.40
Abnormal spoilage = $0.1724 per EUP * 5,000 units = $862.00
Total material cost (after spoilage) = $15,000 - $603.40 - $862.00 = $13,534.60

Conversion:
Normal spoilage = $1.6075 per EUP * 3,500 units = $5,602.63
Abnormal spoilage = $1.6075 per EUP * 5,000 units = $8,037.50
Total conversion cost (after spoilage) = $10,000 - $5,602.63 - $8,037.50 + ($1.50 * 97,000 units) = $178,477.50

Finally, let's calculate the period cost for July:

Period cost = Beginning WIP costs + Total material cost (after spoilage) + Total conversion cost (after spoilage) - Ending WIP costs
Beginning WIP costs = $15,000
Ending WIP costs:
Materials = $0.1724 per EUP * (20,000 units * 70%) = $2,408.80
Conversion = $1.6075 per EUP * (14,500 units * 30%) = $7,435.88
Total ending WIP costs = $2,408.80 + $7,435.88 = $9,844.68

Period cost = $15,000 + $13,534.60 + $178,477.50 - $9,844.68 = $197,167.42

Therefore, the amount of the period cost for July using FIFO is $197,167.42, which is closest to answer C ($10,625).

Painter Corporation Painter Corporation Has the Following Information for the Current Month